SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 000-7633
CONTINENTAL HERITAGE CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 75-1449332
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7674 W. Lake Mead Blvd., Suite 150, Las Vegas Nevada 89128
(Address of principal executive offices) (Zip Code)
(702) 307-2000
(Issuer's telephone number, including area code)
2140 America's Cup Circle, Las Vegas, Nevada 89117
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the (issuer) (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or such
shorter period that registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days. Yes [x] No
Applicable only to issuers involved in bankruptcy proceedings
during the preceding five years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,873,860 as of March 31,
1999.
Transitional Small Business Disclosure Format
Yes [ ] No: [x]
CONTINENTAL HERITAGE CORPORATION
INDEX
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheet - January 31, 1999 F-1
Consolidated Statements of Operations for the
Three Months Ended January 31, 1998 and 1999
and Cumulative from Inception to January 31, 1999 F-2
Consolidated Statements of Cash Flows for the
Three Months Ended January 31, 1998 and 1999 F-3
Notes to Consolidated Financial Statements F-4
Item 2. Management's Discussion and Analysis
or Plan of Operation 1
Part II - Other Information
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Item 1. Financial Statements
CONTINENTAL HERITAGE CORPORATION
AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page No.
Consolidated Balance Sheet as of January 31, 1999 F-2
Consolidated Statement of Operations
for the three months ended January 31, 1998 and 1999 F-3
Consolidated Statement of Cash Flows
for the three months ended January 31, 1998 and 1999 F-4
Notes to Consolidated Financial Statements F-5
CONTINENTAL HERITAGE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheet
January 31, 1999
ASSETS
Current assets:
Deposit $ 28,000
Property assets, at cost less
accumulated depreciation of $1,200 4,267
Other assets 1,000
------
Total assets $ 33,267
======
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Cash overdraft 1,582
Accounts payable and accrued expenses 148,732
Due to shareholders 88,133
Notes payable 46,000
------
Total current liabilities 284,447
Long-term debt 112,000
Stockholders' deficiency:
Common stock, $.10 par value; 10,000,000 shares
authorized; 6,873,860 shares issued and outstanding 687,386
Additional paid-in capital 46,425
Deficit accumulated during the development stage (448,308)
Accumulated deficit (648,683)
-------
Total stockholders' deficiency (363,180)
-------
Total liabilities and stockholders' deficiency $ 33,267
======
CONTINENTAL HERITAGE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement of Operations
Cumulative
Three Months Ended from Inception
January 31, to
1998 1999 January 31, 1999
Development stage activities:
Revenues $ - $ - $ -
------- ------- -------
Operating expenses:
Consulting 72,000 20,526 269,274
Professional fees - 42,672 78,710
General and administrative - 89,694 99,124
Depreciation - 400 1,200
------- ------- -------
Total operating costs 72,000 153,292 448,308
------- ------- -------
Loss from development
stage activities (72,000) (153,292) (448,308)
------- ------- -------
Discontinued operations:
Income from
discontinued operations 3,682 13,370
Gain on disposal of discontinued
operations (net of income taxes
of $31,000) - 96,978
----- ------
Income from
discontinued operations 3,682 110,348
------ -------
Net (loss) $ (68,318) $ (42,944)
====== ======
Net (loss) per common share
(based upon a weighted average of
6,873,860 common shares outstanding):
Loss from
development stage activities $ (0.01) $ (0.03)
Discontinued operations:
Income from
discontinued operations - -
Gain on disposal of
discontinued operations - 0.02
Net (loss) $ (0.01) $ (0.01)
==== ====
CONTINENTAL HERITAGE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the three months ended January 31, 1998 and 1999
1998 1999
Development stage activities:
Net (loss) $ (68,318) $ (42,944)
Adjustments to reconcile net loss to net cash
used in development stage activities:
Income from discontinued operations (3,682) (110,348)
Depreciation - 400
Increase in accounts payable
and due to shareholders - 119,347
Net cash used in development stage activities (72,000) (33,545)
------ ------
Financing activities:
Proceeds from borrowings 72,000 19,582
------ ------
Net cash from financing activities 72,000 19,582
Cash used in discontinued operations (10,466) (26,710)
------ ------
Decrease in cash (10,466) (40,673)
Cash, beginning of period 36,308 40,673
------ ------
Cash, end of period $ 25,842 $ -
====== ======
Supplementary cash flow disclosure:
Interest paid from development stage activities $ - $ -
====== ======
Interest paid for discontinued operations $ 1,036 $ 913
===== ======
CONTINENTAL HERITAGE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Financial Statements
January 31, 1999
Note 1 - General
The consolidated interim financial statements include the accounts of the
Company and its wholly-owned subsidiaries. Material intercompany items and
transactions have been eliminated in consolidation. Such financial statements
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and, accordingly, do not include all
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements. These financial statements
should be read in conjunction with the Company's consolidated financial
statements and notes thereto for the year ended October 31, 1998.
In the opinion of management, the unaudited interim consolidated financial
statements include all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation. The results of operations for
the three months ended January 31, 1999 are not necessarily indicative of
results for the year ending October 31, 1999.
Note 2 - Reverse Acquisition
On November 27, 1998, the Company entered into a Stock Exchange Agreement
with the stockholders of Encore International, Inc. whereby the Company
acquired the outstanding stock of Encore in exchange for 5,500,000 shares of
the Company's common stock with a maximum 2,000,000 additional common shares
issuable to Encore's stockholders in the event certain sales levels are
achieved by the Company on a consolidated basis during the next two years. The
combination will be accounted for as a reverse acquisition. Accordingly, the
consolidated statement of operations includes the activities of Encore for
all periods, as if the combination had been continuously effective.
Encore was organized on December 30, 1997, and has realized no revenues from
operations. It considers itself to be a development stage company and intends
to engage in the wholesale and retail distribution of nutri-ceutical and
homeopathic products.
Pursuant to the terms of the Stock Exchange Agreement, the former stockholders
of Encore may receive 1,000,000 additional common shares if consolidated net
revenues are at least $8,000,000 for the twelve month period beginning March 1,
1999. In that event, in accordance with the loan agreement described in Note
7, two individuals, one of whom was a stockholder in Encore, will also receive
warrants to purchase an aggregate 427,500 of the Company's common shares at
$.3125 through March, 2005.
An additional 1,000,000 of the Company's common shares are reserved for
issuance to the former stockholders of Encore if the Company's consolidated
net revenues are at least $15,000,000 for the twelve month period beginning
March 1, 2000. In such event, in accordance with the loan agreement described
in Note 7, the same two individuals described previously will receive
additional warrants to purchase an aggregate 427,500 of the Company's common
shares at $.3125 per share through March, 2006.
Note 3 - Discontinued Operations
Prior to November 20, 1998, the Company was engaged in the business of
operating and developing real estate. On that date, the Company effectively
terminated its previously conducted real estate operations by transferring all
its operating assets and substantially all related liabilities to its then
principal stockholder in satisfaction of an indebtedness owing to him. The
transaction resulted in a gain of approximately $97,000, net of related income
taxes of approximately $31,000.
Summarized operating data for the discontinued real estate operations are as
follows:
Three Months Ended
January 31,
1998 1999
Rental income $ 53,577 $ 16,818
Income (loss) before provision
for income taxes $ 4,333 $ 13,370
Income (loss) from
discontinued operations $ 3,682 $ 13,370
Note 4 - Note Payable
At January 31, 1999, the Company owed David C. Ellis Profit Sharing Plan
$28,000. The note is non-interest bearing and is due on May 1, 1999.
At January 31, 1999, the Company owed a stockholder $18,000. The loan is due
on demand and bears interest at 10% per annum.
Note 5 - Long-Term Debt
At January 31, 1999, notes payable aggregating $112,000 were due to two
stockholders. The notes carried interest at 6% per annum, and were due on
September 30, 1999. On February 9, 1999, the Company refinanced the notes,
which now bear interest at 10% per annum, and mature August 31, 2000.
Accordingly, the notes have been classified as long-term debt in the
accompanying consolidated balance sheet.
Under the revised terms of the notes, the payment of principal and interest is
subordinated to all payments of principal and interest due on additional note
obligations amounting to $1,000,000 incurred on February 9, 1999 (Note 7). In
connection with the refinancing, the two stockholders received warrants to
purchase an aggregate 224,000 of the Company's common shares at $.3125 per
share through February 8, 2004.
Note 6 - Income Taxes
For federal income tax purposes, costs of start-up activities are capitalized
and amortized over a five year period beginning in the month in which business
operations commence.
Note 7 - Subsequent Events
In February, 1999, the Company borrowed an aggregate $1,000,000 from several
individuals. The notes bear interest at 10% per annum and mature on August
31, 2000. The related loan agreement provides the Company the rights to borrow
additional amounts not to exceed a maximum of $500,000. In connection with the
loan agreement, the lenders also received warrants to purchase an aggregate
2,000,000 of the Company's common shares at $.3125 per share through February
8, 2004 and two other individuals received warrants to purchase an aggregate
351,250 common shares under similar terms.
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward Looking Statement
This Quarterly Report on Form 10-QSB contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be qdeemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward- looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements. These factors include, without limitation, the
Company's ability to establish an adequate client base, its ability to develop
and continue its marketing strategies, and those set forth below in this
Registrant's Quarterly Report on Form 10-QSB under the caption "Certain
Factors That May Affect Future Results."
The following discussion of the Company's results of operations and financial
condition should be read in conjunction with the Company's condensed
consolidated unaudited Financial Statements listed in Part I, Item 1 and the
Notes thereto appearing elsewhere in this Form 10- QSB, and the Company's
audited Financial Statements appearing in the Company's 1998 Annual Report on
Form 10-KSB.
During the fiscal year ended October 31, 1998, including the first three months
of that fiscal year ended January 31, 1999, all of Registrant's revenues were
from the rentals derived from the operation of its Hurst, Texas office
building. The revenues from the Hurst, Texas office building were only
sufficient to pay the expenses and mortgage debt service related to that
building, which mortgage debt was paid off April 1, 1998. All other funding
requirements of the Registrant were provided by advances made to it by its then
principal shareholder. Other than the payment to be made to such person out of
the proceeds of a $150,000 mortgage loan secured by the two properties which
Registrant obtained in the last quarter of fiscal 1998, the Registrant was
unable to make payments of interest or principal on this debt. Accordingly,
unless the Registrant had been able to sell off its real estate holdings or
find another source of capital, it would not have been able to pay its debt to
its principal stockholder or to acquire other properties or assets to produce
revenues.
Management of the Registrant had for the past three years been engaged in a
search for an acquisition that would add a viable business to Registrant so as
to place it in a position to be able to continue as a going concern. Taking
that need into consideration, Registrant entered into the Stock Exchange
Agreement with the shareholders of Encore International, Inc. (Encore) and
acquired all of the outstanding shares of Encore (see Note 2 of the Notes to
Financial Statements). Effective February 9, 1999, the Registrant entered into
a loan agreement to provide it with $1,000,000 in operating capital which has
allowed it to start the business activities of its subsidiary.
After consummation of the Stock Exchange Agreement with Encore and Encore's
subsequent merger with VisionQuest Worldwide, Inc. (VisionQuest), a
subsidiary of the Registrant, the Registrant has initiated its marketing
program (the VisionQuest Marketing Program) though a national network of
independent distributors. The VisionQuest Marketing Program has been developed
by the officers of the Registrant who believe that the program illustrates a
comprehensive understanding of the network marketing industry. The Registrant
intends to align its product line with future health and business trends, as
those trends are identified through research and other means.
The three principal founding members of the business of VisionQuest are Steve
Gould, Lee Kaplan and Robert Bray, who are the Registrant's current officers
and directors.
Initial Products
The natural health and nutritional supplement industry is a $30 billion plus a
year business. The Registrant, through VisionQuest, intends to target the
market pool identified as baby boomers and provide access for those
individuals to innovative, effective and high demand life- enhancing products.
The VisionQuest product line will be composed of historically proven,
life-enhancing health remedies as well as new health discoveries from around
the world including a variety of breakthrough products derived from the sea.
Through high potency nutri-ceutical products and formulations developed using
sound principles and time proven therapies such as homeopathy and Chinese and
ayurvedic medicine, the VisionQuest product line is designed to promote
consumer confidence and results. These proprietary products will be sold
person to person or through convenient and automatic delivery to the customer's
home.
The VisionQuest product philosophy will be based on a three pronged approach
to achieving optimum health: (i) cleanse the body of toxins, (ii) boost the
body's immune system, and (iii) provide the body with comprehensive
nutritional protection.
VisionQuest is engaged in negotiations with a well-known alternative health
care physician who is a specialist in homeopathic formulations in America.
Through this alliance, VisionQuest will secure his exclusive endorsement of the
products. The products have been formulated according to strict standards for
quality and performance, and then electro-magnetically balanced to assure the
formulas to be toxin free and effective.
VisionQuest anticipates that its initial products (Initial Products) will
consist of four exclusive products: (i) a homeopathic formulation designed to
cleanse the liver and kidneys; (ii) an herbal and homeopathic weight management
product based on homeopathic principles; (iii) a high potency shark liver oil
designed to enhance the body's natural immune system; and (iv) a marine
nutri-ceutical formulation containing special anti-oxidants and omega 3 fish
oils.
All of the Initial Products consist of proprietary formulations of homeopathic
and/or marine products and their distribution will be exclusive to VisionQuest.
VisionQuest and the brokers of these product components are currently involved
in negotiations to secure the exclusive rights to the distribution and sale of
these products for VisionQuest. Additionally, VisionQuest is pursuing
trademark and tradename registrations regarding possible tradenames for the
Initial Products. This trademark process is not yet complete. VisionQuest has
entered into an agreement with Marine Biologics, Inc., which is a broker for
third party suppliers of the components of VisionQuest's Initial Products,
whereby VisionQuest will have exclusive distribution rights for its products.
This contract is for a term of five years and automatically renews for an
additional term at the end of five years, provided that neither party provides
written notification of its intention not to renew.
VisionQuest has been actively working with Dr. Leonard Haimes, a physician who
is nationally recognized in the field of bariatric medicine, to test and
endorse a state-of-the-science weight loss regimen that the physician
formulated. Initial results appear to be positive. This weight management
program will include a guided imagery success program to offer long term weight
loss success. On March 25, 1999, VisionQuest entered into a five-year
agreement with Dr. Haimes to perform consulting and support services relative
to both the current product line of VisionQuest and in the development of new
products for VisionQuest.
The Initial Products will be periodically and strategically followed with a
variety of additional homeopathic and nutri-ceutical products which will
compliment the VisionQuest marketing program.
VisionQuest has placed its order for the initial inventory of its Initial
Products and expects delivery of the same during the third week of May 1999.
VisionQuest Marketing Program
VisionQuest intends to market its products through a network of independent
contractors it will call Team Members. These Team Members will purchase the
product directly from VisionQuest and then resell the product to end-users,
making a retail profit. In addition, through a comprehensive, state-of-the-art
multi-level commission structure, Team Members will have the opportunity to
earn bonuses on their member organization which they build at their own pace.
The Team Members will be supported through an array of marketing and training
tools provided by the Registrant.
In the effort to quickly establish its membership network, VisionQuest has
gathered commitments from a significant number of key independently contracted
sales people with backgrounds in network marketing and business operation.
VisionQuest intends, through utilization of these independent contractors, to
recruit many more independent distributors into the network in a relatively
short amount of time.
The Registrant anticipates that it will commence the distribution of its
Initial Products through its network of independent contractors promptly
following its receipt of its initial inventory of such products during May
1999.
1999 Private Financing
The Registrant estimated that it required between $1,000,000 to $1,500,000 in
funding to establish the new line of business. Effective February 9, 1999, the
Registrant entered into a Loan Agreement with seven individual investors (the
Investors), pursuant to which the Investors agreed to lend $1,000,000 (the
Loan) to the Registrant. The loan proceeds have been placed into an escrow
account which the Registrant may access for advances through application to a
Disbursement Agent. The Disbursement Agent, Gerald M. Holland, is a
shareholder of the Registrant and one of the Investors. Through April 30, 1999,
the Registrant has drawn $800,000 from the funds set aside in the escrow
account.
In return for their agreement to loan funds to the Registrant, the Investors
received a promissory note for $1,000,000 plus Class A Warrants for the
purchase of an aggregate of 2,000,000 shares of the Registrant's common stock.
The promissory note bears interest at the rate of 10% per annum and matures on
August 31, 2000. The Class A Warrants have an exercise price of $.3125 per
share and expire on February 8, 2004. The Investors also agreed to loan, on a
pro rata basis, an additional $500,000 over and above the $1,000,000 original
loan if additional funds are required by the Registrant for purchase of
product. If the additional loan is made, the Investors will receive additional
Class A Warrants on a pro rata basis for the additional funds loaned. Class A
Warrants for the purchase of an aggregate of 351,250 shares of the Registrant's
common stock were also issued to Gerald M. Holland and Damaso W. Saavedra, two
individuals who represented the Investors in the negotiations with the
Registrant, which were Warrants those Investors would have otherwise received.
As additional collateral for the Loan, Steve Gould, Lee Kaplan, Robert Bray and
Gerald Holland executed a Non-Recourse Pledge Agreement and an Irrevocable
Proxy in favor of the Investors. The Pledge Agreement provides that Messrs.
Gould, Kaplan, Bray and Holland pledge as collateral security for payment of
the Loan an aggregate of 4,978,264 shares of the Registrant's Common Stock
which they hold to the Investors. The Investors at any time prior to repayment
of the initial loan and/or the additional loan may use the Irrevocable Proxy to
vote on major decisions presented to the Registrant's shareholders, provided
however, that the Proxy may not be used by the Investors to vote to remove any
director or officer from the Registrant for reasons other than gross
negligence, theft, or legal incompetency. Further, the Investors may not vote
to elect any person as a director of the Registrant other than those persons
currently holding that position. The Proxy terminates upon repayment of the
initial loan and/or the additional loan to the Investors.
In connection with the Loan, the Registrant also granted to the Investors a
Master Distributorship directly below the Master Distributorship granted to Lee
Kaplan. The Master Distributorship granted to the Investors shall be operated
in accordance with the policies of VisionQuest Worldwide, Inc., the subsidiary
of the Registrant, and is entitled to receive compensation in accordance with
VisionQuest's Distributor Compensation Plan, commissions and bonuses on
down-line sales activity. The Investors shall receive 80% of the commissions
earned by the Master Distributorship and 10% of such commissions shall be paid
to each of Messrs. Holland and Saavedra. Payment of the commission earned by
the Master Distributorship will be made monthly by the Registrant and will be
included in the Company's regular monthly bonus run as to its independent
Distributors and/or Team Members.
On October 1, 1998, prior to the Registrant's acquisition of Encore
International, Inc., Encore executed and delivered promissory notes in the
amount of $56,000 each to Steve Gould and Lee Kaplan in payment for funds
advanced by them to initiate the business of Encore. Such notes bore interest
at the rate of 6% per annum and matured on September 30, 1999. In connection
with the Registrant's 1999 private financing, both Messrs. Gould and Kaplan
agreed to accept replacement notes which provided that no payment of interest
or principal may be made to them until such time as all payments of principal
and interest due on the promissory notes delivered to the Investors shall have
been made. The replacement notes delivered by the Registrant to Messrs. Gould
and Kaplan bear interest at a rate of 10% per annum and mature August 31, 2000.
In addition to the replacement notes, Messrs. Gould and Kaplan will each
receive Class A Warrants to purchase 112,000 shares of Registrant's Common
Stock. Such Class A Warrants are on the same terms and conditions as the Class
A Warrants issued to the Investors in the 1999 Private Financing.
Use of Proceeds of 1999 Private Financing
The majority of the proceeds of the 1999 private financing will be utilized
for operating capital during VisionQuest's pre-launch phase. The funding will
provide for payroll, deposits for software development, communications
equipment, lease and cash payments on furniture as well as office and computer
related equipment and payment of accounts payable. Large deposits and payments
are due on product inventory and marketing materials.
During the first three months of operation, the Registrant will utilize the
loan proceeds for the cost of day to day business until such time as
VisionQuest's operations are expected to earn a profit. Additionally, capital
is required to cover aggressive product and marketing material purchases,
particularly if the growth of the distributor force should exceed projections.
The Registrant intends to pursue a moderately aggressive approach to building
inventory during the first six months, while maintaining some funds in reserve
so that it can support the needs of the Registrant's Team Members in a timely
manner.
Certain Factors Which May Affect Future Results
The Registrant may be considered a development stage company because of its
entry into a new line of business and there is a significant risk that the
Registrant may not be able to obtain the volume of business necessary to become
a going concern. The Registrant believes that the VisionQuest business plan
provides a comprehensive approach in assembling all the essential parts that
will make up a successful network marketing company; however, there can be no
assurance that the Registrant will be able to generate revenues or achieve
profitable operations.
The Registrant's capital requirements in connection with its VisionQuest
development activities have been and will continue to be significant. To date,
it has been dependent upon the proceeds of sales of its securities to private
investors to fund its development activities. The Registrant anticipates that
its available cash will be sufficient to satisfy its contemplated cash
requirements for at least the period ending December 31, 1999. After such
time, the completion of the Registrant's development activities relating to its
products and the commencement of marketing activities in connection with such
products will require continued funding. The Registrant has no current
arrangements other than those described above with respect to sources of
additional financing and there is no assurance that other additional financing
will be available to the Registrant in the future on commercially reasonable
terms, or at all. The inability to obtain additional financing, when needed,
would have a material adverse effect on the Registrant, including possibly
requiring the Registrant to curtail or cease operations. To the extent that any
future financing involves the sale of the Registrant's equity securities, the
Registrant's then existing stockholders could be substantially diluted.
The Registrant does not contemplate that it will directly manufacture any of
its products. It intends to contract with third parties to manufacture its
products. Although management believes it will be able to negotiate
satisfactory manufacturing and supply agreements, the failure to do so would
have a material adverse effect on the Registrant. Furthermore, there can be no
assurance that such manufacturers will dedicate sufficient production capacity
to satisfy the Registrant's requirements within scheduled delivery times or at
all. Failure or delay by the Registrant's suppliers in fulfilling its
anticipated needs would adversely affect the Registrant's ability to develop
and market its products. While management believes that it has or will be
making satisfactory arrangement for supply of its products it anticipates that
the Registrant will obtain certain of them from a single source, or limited
number of sources, of supply. In the event that certain of such suppliers are
unable or unwilling to provide the Registrant with the products on commercially
reasonable terms, or at all, delays in securing alternative sources of supply
would result and could have a material adverse effect on the Registrant's
operations.
The markets that the Registrant intends to enter are characterized by intense
competition. The Registrant's products will directly compete with similar
products of numerous well- established companies. Certain of the competitors
dominate their industries and have the necessary financial resources to enable
them to withstand substantial price competition or downturns in the market for
the products, which the Registrant may not be able to withstand.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
10.1 Consulting Agreement with Dr. Leonard Haimes (incorporated by reference
from Exhibit 10.19 to Registrant's Form 10-KSB/A filed with the
Commission on May 14, 1999.)
Reports of Form 8-K:
Form 8-K filed on January 26, 1999 reported a change in the Company's
independent certified public accountants.
Form 8-K/A filed on January 26, 1999 reported financial information concerning
the Company's acquisition of Encore International, Inc.
Form 8-K filed on March 18, 1999 reported the Company's 1999 private financing.
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchanges
Act of 1934, the Registrant has duly caused this Quarterly Report on Form
10-QSB to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 14, 1999. CONTINENTAL HERITAGE CORPORATION
BY: /s/Steve Gould
Steve Gould, President, Chief Executive
Officer, Treasurer, Chief Financial Officer
and Director
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<NET-INCOME> (42,944)
<EPS-PRIMARY> (.01)
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</TABLE>
